Address  Before 


Fhe  American  Bankers’  Association 


J 


Washington,  October  Eleventh 

Nineteen  Hundred  and  Five 


Frank  A.  Vanderlip 


Address  Before 

The  American  Bankers’  Association 


Washington,  October  Eleventh 
Nineteen  Hundred  and  Five 


Frank  A.  Vanderlip 


St*  c> 


With  almost  unmixed  satisfaction  the  members  of  the 
American  Bankers’  Association  may  contemplate  the  progress 
of  financial  events  during  the  year  which  has  elapsed  since 
their  last  meeting.  Little  short  of  bewildering  is  the  array  of 
statistics  which  could  be  presented  to  demonstrate  the  rapid 
growth,  sound  development  and  satisfactory  progress  made  in 
the  commercial,  financial  and  industrial  fields.  It  is  safe  to 
assert  that  never  before  was  our  population  so  fully  employed. 
Never  before  was  the  general  level  of  wages  so  high,  never 
before  has  the  aggregate  volume  of  industry  been  as  great  as 
it  is  to-day,  never  was  the  future  of  industrial  activity  so 
fully  assured  by  advance  orders.  Never  was  the  measure  of 
commercial  activity  so  large,  and  never  before  did  such  bounti- 
ful harvests  meet  such  eager  markets. 

Enormous  Agricultural  Wealth. 

The  total  value  of  the  agricultural  crop  of  the  United 
States  will  this  year  exceed  by  $500,000,000  the  average 
value  of  that  crop  during  the  last  ten  years.  The  money 
value  on  the  farms  of  this  season’s  crop  will  reach  the  stag- 
gering total  of  $3,000,000,000.  You  of  the  West  and  South 
are  close  to  the  true  meaning  of  these  figures.  To  eastern 
bankers  such  statistics  are  merely  figures.  Their  aggregate  is  so 
vast  that  it  is  difficult  to  comprehend  their  true  import.  You 
who  are  closer  to  the  fields,  the  granaries  and  the  cotton 
presses,  you  who  with  your  own  eyes  see  the  direct  results  of 
this  flood  of  wealth,  are  more  competent  to  comprehend  its 
significance. 

Under  the  influence  of  harvests  less  bountiful  than  this, 
following  one  another  with  providential  regularity,  in 
the  last  half  dozen  years,  you  have  seen  whole  communities 
change  in  character.  People  whose  only  acquaintance  with 
finance  was  their  knowledge  of  mortgage  payments  made  to 
absent  creditors,  have  been  converted  into  commonwealths 
with  surplus  capital  and  investment  capacity. 


The  whole  great  Mississippi  Valley  gives  promise  that 
at  some  day,  distant  perhaps,  it  will  be  another  New  Eng- 
land for  investments.  There  is  a developing  bond  market 
there  which  is  of  constant  astonishment  to  eastern  dealers. 
You  have  seen  the  farmer  in  these  half  dozen  years  discover 
the  uses  of  a bank  account,  deposit  his  income,  pay  off  his 
mortgage,  accumulate  a surplus  and  actually  become  an  in- 
vestor in  corporate  securities.  You  have  seen  that  sort  of 
thing  multiplied  and  repeated  until  the  aggregate  wealth  of 
the  western  and  southern  States  has  become  astounding,  even 
to  you  who  have  taken  an  active  part  in  its  growth. 

Now  on  top  of  these  succeeding  years  of  good  harvests, 
good  prices,  intelligent  liquidation  of  debts  and  thrifty  ac- 
cumulation of  surplus,  comes  the  unprecedented  figures  of  the 
value  of  this  season’s  crop  yield.  Surely  America  is  a country 
blessed. 


Industrial  Prosperity  General. 

The  feature  of  agricultural  life  in  these  recent  years  has 
been  great  income,  diminishing  liabilities  and  the  provision  of 
ample  working  capital,  with  all  the  economies  and  advantages 
which  ample  working  capital  provides.  These  conditions  have 
worked  marvels  in  the  way  of  prosperity  for  the  agricultural 
communities.  But  prosperity  is  not  confined  to  the  farms. 
These  same  influences,  large  income,  diminishing  liabilities  and 
the  provision  of  ample  working  capital,  have  been  factors  in 
the  industrial  field  as  well;  we  can  find  a great  prosperity 
under  shop  roofs  as  in  the  fields.  The  days  when  industrial 
competition  commonly  reached  a point  of  destructive  severity 
are  largely  past.  The  days  when  narrowness  of  outlook  and 
lack  of  co-ordination  led  to  the  wasteful  duplication  of  plants 
and  a vast  unproductive  expenditure  of  capital,  have  given 
way  to  more  intelligent  management.  That  destructive  com- 
petition, that  duplication  of  unproductive  expenditure,  led  with 
unerring  economic  force  to  the  industrial  combinations  which 
marked  the  last  years  of  the  century  recently  closed.  The  forces 
which  led  to  these  combinations  were  so  irresistible  that  some 
industries  were  swept  together  under  hastily  considered  plans. 


4 


Bjimmiitnmj)  sitipaQucg  up  ipp 


Combinations  were  made  that  were  properly  open  to  criticism. 
Heterogeneous  elements  were  united  in  ways  that  meant  in- 
evitable friction.  Diverse  interests  were  brought  together  but 
could  not  in  a day  be  harmonized.  For  a time  there  was 
doubt  as  to  whether  or  not  true  wisdom  had  been  shown  by 
the  men  who  formed  these  great  industrial  combinations. 

Advantages  of  Industrial  Combinations. 

Evidence  has  now  accumulated,  I believe,  to  warrant  an 
answer  to  that  question.  We  anticipated  economies  when 
these  combinations  were  made,  but  we  are  only  just  begin- 
ning to  understand  something  of  the  full  advantage  which  may 
result  from  the  national  organization  of  certain  industries.  It 
took  a little  time  to  get  these  organizations  running  smoothly. 
It  was  not  easy  to  find  men  with  the  broad  economic  insight 
which  the  management  of  such  great  enterprises  required. 
When  a nation  meets  a crisis  men  seem  to  be  raised  up  ready 
for  the  tasks.  When  this  country  faced  war  we  produced  great 
military  generals.  To-day,  when  the  crisis  in  the  management 
of  vast  industrial  combinations  is  upon  us,  we  are  producing 
great  captains  of  industry.  These  managers  are  not  all  great 
administrators  any  more  than  the  war  officers  were  all  great  ad- 
ministrators, but  I believe  the  world  has  never  seen  the  parallel 
of  the  business  genius  which  is  coming  into  the  work  of  organ- 
izing some  of  these  great  industrial  combinations.  Economies 
are  being  brought  about  that  were  not  conceived  of  when  these 
organizations  wrere  formed.  The  co-ordination  of  a whole 
field  of  industry,  the  organization  and  distribution  of  plants 
so  that  the  industry  is  working  under  the  least  possible  disad- 
vantage in  respect  to  transportation  charges,  the  combination 
into  such  aggregates  that  expenditures  may  be  made  to  effect 
small  savings,  or  in  introducing  mechanical  aids  which  would 
be  impossible  in  small  plants,  but  which  on  a large  scale  effect 
remarkable  economies — all  these  developments  are  answering 
the  question  as  to  the  wisdom  of  these  combinations.  The  re- 
sults are  beginning  to  appear  in  the  income  accounts  and  bal- 
ance sheets.  The  improvement  there  foreshadowed  is,  I 
believe,  but  an  indication  of  what  may  yet  come. 


5 


With  the  aid  of  a wealth  of  raw  material  and  a genius 
for  mechanical  manipulation,  we  developed  a few  years  ago  a 
capacity  for  industrial  competition  which  startled  the  world. 
England,  whose  supremacy  had  been  of  such  long  standing 
that  she  rested  in  serene  assurance,  was  crowded  out  of  some 
of  the  international  competitive  markets.  She  was  crowded  to 
second  place  by  America  and  then  to  third  place  by  Germany. 
Our  exports  of  manufactures  doubled  and  doubled  again  and 
we  had  to  be  reckoned  with  in  every  international  market. 


The  Awakening  of  Europe. 

Then  came  a halt.  Europe  awoke  to  the  situation.  She 
bought  samples  of  our  tools  and  duplicated  them.  She  sent 
an  army  of  investigators  to  study  our  methods.  She  arrested 
us  in  our  commercial  conquest.  That  halt  is  proving  to  have 
been  only  temporary.  Again  we  are  showing  unexampled 
totals  in  our  exports  of  manufactures.  The  present  figures  are 
substantially  exceeding  the  totals  which  we  made  at  the  time 
Europe  coined  the  phrase,  “a  commercial  invasion.”  The  rea- 
son for  this  late  improvement,  this  regaining  of  ground  tem- 
porarily lost,  this  making  of  new  records,  lies  in  the  perfection 
of  industrial  organization  which  has  been  made  possible  by  the 
great  combinations.  I believe  we  are  just  started  on  a new 
“commercial  invasion.”  We  have  the  cheapest  raw  material, 
the  most  efficient  labor,  a pre-eminent  ability  in  the  adoption  of 
mechanical  aids,  and  all  that  is  combined  with  what  I believe 
to  be  transcendent  genius  for  economic  organization.  The 
combination  of  these  forces  will,  I conceive,  be  well  nigh  irre- 
sistible. The  logic  of  this  combination  spells  for  us  an  un- 
exampled development  of  foreign  trade.  All  we  need  is 
intelligently  to  foster  the  possibilities.  I am  not  giving  rein 
to  imagination.  The  cold  figures  of  Government  statistics 
show  the  beginning  of  this  new  industrial  conquest.  Com- 
parisons of  manufacturers’  cost  sheets  reveal  the  possibilities 
of  future  successes.  Our  own  homogeneous  domestic  market, 
as  great  as  that  of  half  of  Europe,  contrasts  strikingly  with 
the  tariff-hampered  field  of  European  manufacturers.  Our 
foreign  competitors  meet  at  every  turn  the  obstacles  of  cus- 


toms  restrictions,  of  racial  differences  and  national  jealousies. 
This  great  homogeneous  market  of  ours  makes  a solid  foun- 
dation upon  which  our  industries  can  stand  while  they  reach 
out  successfully  into  competitive  fields. 

Development  of  Foreign  Trade. 

The  conquest  of  foreign  markets  will  not  be  an  easy  one, 
however.  We  are  likely  to  meet  with  defeat  and  failure  at 
some  points  caused  by  our  failure  to  give  proper  attention  to 
the  business — and  there  are  many  examples  of  that  in  the  past 
— or  caused  by  a combination  of  obstacles  which  we  cannot 
overcome.  Perhaps  we  may  see  an  example  of  the  latter  situ- 
ation in  the  Far  East.  It  is  by  no  means  certain  that  Japan 
is  to  stand  courteously  at  the  open  door  of  Oriental  trade  and 
permit  us  to  enter.  We  have  seen  in  China  what  a racial 
boycott  can  do  in  interfering  with  trade  totals.  Oriental  trade 
is  not  something  won,  but  something  to  be  striven  for  and 
there  will  be  difficulty,  defeat,  disappointment  and  discourage- 
ment. Nor  is  the  trade  of  Europe  to  be  ours  for  the  asking. 
The  obstacles  of  tariff  walls  grow  higher  with  every  meeting 
of  Continental  Parliaments.  The  ability  to  compete  with  us 
increases  as  our  methods  are  better  comprehended.  Germany 
has  gone  so  far  ahead  of  us  in  the  proper  education  of  the  in- 
dustrial classes  that  we  may  lose  at  times  from  that  cause 
alone. 

The  World’s  Production  of  Gold. 

I do  not  mean  that  advantage  is  to  come  to  us  through 
disaster  to  others.  We  have  perhaps  more  than  our  just 
measure  of  prosperity,  but  there  seems,  at  the  moment,  to  be 
good  measure  throughout  the  world.  The  world  has  with- 
stood the  financial  strain  of  a war  which  cost  the  combatant 
nations  two  billion  dollars.  It  has  withstood  that  strain  so 
easily  that  one  is  led  to  inquire  how  it  has  been  possible  that 
such  a disaster  should  have  produced  no  more  unfortunate 
results.  I believe  the  answer  to  that  should  be  looked 
for  in  a quarter  to  which  our  academic  friends  have  been 
giving  some  attention,  but  which  has  not  as  yet  come  to 


7 


excite  very  great  interest  among*  practical  financiers.  It  is 
not  alone  to  the  raisers  of  grain  that  nature  has  been  bountiful 
of  late.  The  mines  of  the  world  have  been  yielding  treasure 
as  lavishly  as  have  our  fields.  In  every  day  of  this  year, 
nineteen  hundred  and  five,  work  days  and  feast  days,  holi- 
days and  Sundays,  there  will  be  drawn  from  the  ground  a 
million  dollars  of  new  gold.  And  then  when  the  total  is 
finally  cast  up  there  will  be  a number  of  odd  millions  to  spare 
above  that  average.  The  mines  of  the  world  will  produce 
this  year  $375,000,000  of  gold.  The  final  figures  for  the  pro- 
duction of  gold  in  1904  have  recently  been  made  and  they 
footed  $347,000,000.  We  may  reasonably  look  forward  in 
the  near  future  to  an  annual  average  output  of  $400,000,000  of 
new  gold  for  at  least  a considerable  number  of  years.  When 
we  remember  that  in  1885  the  production  of  gold  was  but 
$1 15,000,000,  we  begin  to  get  a comprehensive  view  of  the  sig- 
nificance of  this  increase.  When  we  remember  further  that  the 
entire  monetary  stock  of  gold  in  the  world  is  about  $5,700,- 
000,000  we  can  calculate  that  the  output  from  the  mines  in 
the  next  fourteen  years  promises  to  equal  a total  as  great  as 
the  present  monetary  stock  of  gold.  These  figures  are  start- 
ling. They  perhaps  suggest  the  possibility  of  a disturbance  of 
values.  It  does  not  follow,  of  course,  that  with  the  produc- 
tion of  $400,000,000  of  gold  per  annum  the  monetary  stocks 
will  be  increased  by  that  amount.  The  uses  of  gold  in  the 
domestic  arts  draw  off  at  least  $75,000,000  a year,  but  that  will 
leave  over  $300,000,000  a year  to  add  to  the  gold  reserves. 
So  eminent  an  economist  as  Le  Roy  Beaulieu  has  estimated 
that  the  monetary  stocks  of  the  world  will  be  doubled  in 
twenty-five  years.  In  the  light  of  recent  statistics  of  the  out- 
put of  production  I have  no  doubt  that  he  would  modify  that 
estimate  and  incline  to  the  view  that  the  monetary  stocks  will 
be  doubled  in  twenty  years. 

Effect  of  Increased  Gold  Production. 

What  is  this  to  mean  to  the  business  situation?  What 
is  to  be  its  influence  upon  prices?  What  effect  will  it  have 
upon  money  rates?  These  are  no  longer  academic  questions. 

8 


L 


They  are  practical  considerations  which  need  to  be  taken  into 
account  by  business  men.  The  great  increase  in  gold  pro- 
duction which  has  been  in  progress  since  the  close  of  the 
Boer  War  has,  in  my  opinion,  been  a factor  in  the  rapid 
recovery  from  the  depression  of  three  years  ago.  At  that 
time,  through  financial  excesses  and  indiscretions,  we  had  been 
led  into  a dangerous  position.  In  Europe  also  the  chilling 
effect  of  the  great  destruction  of  capital  occasioned  by  that  war, 
was  everywhere  manifest.  This  new  gold  production  pouring 
itself  into  the  bank  reserves  of  the  world  has  been  an  influence 
in  bringing  about  the  quick  recovery  from  depression  and  in 
withstanding  the  shock  of  the  further  destruction  of  capital 
which  the  Russo-Japanese  War  entailed. 

The  classical  economists,  Ricardo,  Adam  Smith  and  Mill, 
evolved  the  quantity  theory  of  money.  They  held  that  the 
prices  of  things  would  vary  with  the  quantity  of  money  in 
existence.  If  the  money  stock  were  doubled,  prices  would  be 
doubled ; if  the  money  stock  were  halved,  prices  would  be  cut 
in  two.  That  theory  has  been  proved  to  be  inadequate.  There 
are  many  other  interfering  circumstances  and  modifying  con- 
ditions. Nevertheless  there  is  economic  truth  and  force  in  it. 
It  is  within  the  intimate  knowledge  of  all  of  us  that  if  our  bank 
reserves  are  increased  we  are  moved  to  increase  our  loans.  A 
pressure  to  increase  loans  tends  to  reduce  interest  rates.  Lower 
interest  rates  enhance  the  price  of  incoming  paying  securities. 
I think  every  one  will  accept,  subject  to  important  modifying 
conditions,  the  statement  that  an  increase  in  the  monetary 
supply  has  a tendency  to  advance  prices.  There  may  be  other 
influences  that  will  counteract  in  the  final  result.  There  can 
be  no  doubt,  however,  that  with  every  million  dollars  of  gold 
added  to  the  bank  reserves  of  the  world,  there  is  a disposition 
to  increase  credit  lines.  That  increase  in  credit  lines  in  turn 
has  its  influence  on  the  side  of  advancing  prices.  As  a practi- 
cal matter,  however,  I do  not  believe  we  are  facing  any  eco- 
nomic revolution  as  a result  of  this  influx  of  gold.  We 
must  remember  that  the  growth  of  business  may  keep  pace 
or  even  run  ahead  of  the  substantial  growth  in  the  gold  re- 
serve so  that  in  spite  of  actual  increase  the  relative  percentage 


9 


of  gold  reserves  to  credit  demand  would  leave  prices  un- 
changed. 

Increased  Gold  and  the  Interest  Rate. 

The  subject  is  a fascinating  one,  but  at  the  outset  it  must 
be  admitted  that  it  is  not  one  for  accurate  calculation  and 
definite  conclusion.  There  are  a few  considerations,  however, 
and  some  popular  misapprehensions  in  regard  to  it  concern- 
ing which  it  would  be  well  to  have  clear  thinking.  For  ex- 
ample, it  is  rather  commonly  said  a great  increase  in  the  gold 
supply  will  bring  us  to  a permanently  lower  interest  basis. 
That  is  a misconception.  It  is  true  that  the  first  effect  of  gold 
additions  to  a bank  reserve  will  be  to  lower  the  interest  rate. 
That  effect,  however,  is  temporary.  When  the  money  supply 
has  reached  a permanent  level,  no  matter  how  great  the  in- 
crease in  it  has  been,  the  interest  rate,  other  things  remaining 
unchanged,  will  find  its  regular  level.  Interest  is  but  a payment 
in  kind.  If  the  value  of  money  depreciates,  the  value  of  in- 
terest payment  depreciates  as  well.  We  need  look  for  no  per- 
manently lower  interest  basis  as  a result  of  an  increase  in  the 
money  stock,  but  while  that  increase  is  in  progress,  the  re- 
serves are  being  constantly  augmented  and  the  tendency  would 
be  toward  lower  rates. 

“A  Tree  Never  Quite  Grows  to  Heaven.” 

There  is  another  consideration  which  we  should  have 
clearly  in  mind.  Disregarding  for  the  moment  all  other  in- 
fluences, we  may  lay  down  the  principle  that  an  increase  in 
the  supply  of  money  will  tend  to  advance  the  price  of  real 
property,  but  the  price  of  an  obligation  repayable  in  money 
will  not  tend  to  advance.  That  is  to  say  that  real  estate  and  all 
forms  of  property,  including  shares  of  corporate  stock,  which 
represent  an  ownership  in  real  property,  would  advance,  but 
bonds,  which  represent  only  the  right  to  demand  a payment  in 
money,  would  not  advance.  All  persons  having  a fixed  income 
would  find  the  purchasing  power  of  that  income  reduced.  The 
return  from  mortgages  and  bonds  would  have  a reduced  pur- 
chasing power.  Persons  receiving  fixed  salaries  and  wage  earn- 

IO 


ers  generally  would  be  at  a disadvantage,  for  their  incomes 
would  not  tend  to  increase  as  rapidly  as  the  purchasing  power 
of  their  wages  decreased.  Under  such  a set  of  circumstances 
there  would  be  constant  pressure  from  wage  earners  in  order 
to  increase  their  incomes  so  as  to  keep  pace  with  the  advanced 
cost  of  living.  Is  not  that  exactly  what  we  have  been  seeing 
and  are  we  not  likely  to  see  more  of  that  same  pressure  to 
advance  wages  as  the  cost  of  living  advances  ? 

The  Outlook  for  the  Future. 

These  are  tendencies  which  would  become  sharply  mani- 
fest if  there  were  not  counteracting  influences  opposing  them. 
That  there  are  sure  to  be  such  counteracting  influences  goes 
without  saying.  I recall  a conversation  which  I once  had  with 
the  great  German  financier,  von  Siemens,  the  creator  of  the 
Deutsche  Bank.  The  balances  of  trade  in  our  favor  had  been 
climbing  up  from  $400,000,000  to  $500,000,000  and  then  had 
gone  well  beyond  $600,000,000,  and  it  looked  as  if  we  might 
drain  Europe  of  her  whole  monetary  stock  if  that  sort  of 
thing  was  to  go  on.  I asked  Herr  von  Siemens  what  was  to 
be  the  outcome  for  Europe.  He  replied  with  a well  known 
German  phrase,  “A  tree  never  quite  grows  to  heaven.’'  Events 
soon  proved  that  this  tree  of  favorable  trade  balances  could 
not  quite  grow  to  heaven,  although  for  the  moment  it  did 
look  as  though  it  were  likely  to.  And  so  with  this  increased 
production  of  gold  which  gives  promise  of  doubling  the 
monetary  stock  of  the  world  in  the  next  score  of  years.  We 
might  expect,  if  the  theories  of  the  classical  economists  held 
good,  that  with  a doubling  of  the  gold  stock  would  come  a 
doubling  of  prices.  We  can,  however,  be  very  certain  that 
the  theory  will  not  entirely  hold  good.  There  will  be  counter- 
acting influences.  While  there  will  undoubtedly  be  a tendency 
to  advance  prices  as  a result  of  this  influx  of  gold  into  the 
bank  reserves  of  the  world,  I do  not  believe  the  gold  produc- 
tion is  likely  to  become  a serious  menace.  I do  not  believe  that 
it  will  so  disturb  those  business  relations  that  are  based  upon 
the  terms  of  money,  as  to  cause  any  vital  derangement  of 
affairs. 


What  I do  believe  is  that  there  is  likely  to  follow  just 
what  followed  in  the  two  former  periods  of  the  world’s  his- 
tory when  there  was  an  extraordinary  production  of  gold 
added  to  the  monetary  stocks.  One  of  these  periods  followed 
the  discovery  of  America,  when  the  treasures  of  Mexico  and 
Peru  were  exploited.  The  other  was  in  the  years  following 
the  discovery  of  gold  in  California  and  Australia.  In  each 
case  a mighty  impulse  was  given  to  the  exploitation  of  virgin 
fields  of  development.  It  seems  to  me  not  improbable  that 
the  next  few  years  will  witness  the  expansion  of  the  field  of 
commercial  enterprise  into  new  places.  Countries  that  are 
commercially  and  industrially  backward  will  yield  to  this  new 
influence.  It  seems  to  me  that  one  of  the  direct  and  important 
effects  of  this  great  production  of  gold  will  be  to  give  an 
impulse  to  the  development  and  industrial  exploitation  of 
South  America,  Africa,  Asia  and  eastern  Europe.  At  our 
own  hand  is  South  America  on  one  side  and  China  and  Japan 
on  the  other.  We  are  rapidly  awakening  to  the  commercial 
possibilities  within  these  countries.  If  we  are  to  have  an 
influx  of  gold  more  than  ample  to  sustain  the  credit  operations 
for  our  domestic  affairs,  that  fact  will  tend  to  lead  our  in- 
terests into  these  new  fields  of  exploitation.  Then,  in  turn,  a 
wider  use  of  credit  which  these  new  fields  will  develop  and 
the  increased  reserves  which  that  wider  use  of  credit  will  make 
necessary,  will  probably  absorb  the  increasing  gold  stock  in 
beneficient  uses,  preventing  it  from  ever  becoming  a serious 
menace  to  business  organization. 

A Time  for  Prudence  and  Conservatism. 

The  outlook  is  surely  bright.  What  can  hurt  us  ? What 
dangers  are  ahead?  With  bountiful  harvests,  with  lavish 
mineral  production,  with  increasing  financial  strength,  with 
wonderfully  improved  industrial  organization,  with  a sound 
banking  position,  and  with  an  impulse  already  given  to  every 
form  of  commercial  activity,  what  is  there  to  fear  in  the 
future?  Is  it  clear  sailing?  Can  we  make  commitments 
without  fear  for  the  future?  Is  the  whole  outlook  into  a 
cloudless  financial  horizon?  An  optimist  might  be  forgiven 


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for  thinking  that  it  ought  to  be.  We  have  a good  many  ele- 
ments of  a firm  foundation  under  our  feet  but  again  we  might 
quote  the  German  phrase,  “A  tree  never  quite  grows  to 
heaven.”  Sure  as  we  are  of  many  of  the  substantial  founda- 
tion stones  upon  which  to  rear  a structure  of  prosperity,  we 
may  be  quite  as  sure  that  there  are  dangers  lurking  in  the 
situation.  Some  may  be  avoided,  others  will  not.  Some  it 
is  possible  to  foresee,  others  we  will  fail  to  recognize  until  we 
see  their  evil  effects.  Among  those  which  we  know  exist, 
there  comes  first  to  mind  our  illogical  and  unscientific  cur- 
rency system.  We  know  that  this  system  may  at  any  time 
breed  us  trouble.  We  know  that  there  is  not  a European 
financier  of  broad  intelligence  who,  looking  dispassionately 
from  without  at  this  currency  system  of  ours,  does  not  feel 
that  it  has  in  it  dynamic  possibilities  for  trouble  even  if  other 
conditions  are  favorable.  Indeed  it  is  when  all  other  condi- 
tions are  most  favorable  that  the  danger  is  the  greatest.  Now, 
in  the  very  fullness  of  the  prosperity  that  we  have,  there  might 
be  a pitfall  for  us  in  that  quarter.  A strain  is  on  our  currency 
system.  With  our  usual  good  luck  we  may  avoid  disaster 
but  it  is  the  sort  of  time,  nevertheless,  when  we  ought  clearly 
to  see  that  we  have  a system  which  might  endanger  our  bank- 
ing position  and  retard  most  seriously  our  commercial  develop- 
ment. We  know  that  we  are  threatened  by  great  social  dis- 
orders ; that  the  edict  of  a labor  leader  might  change  a cloud- 
less outlook  into  an  uncertain  one.  We  know  there  is  a dis- 
regard of  law  in  labor  unions  and  in  corporation  offices  alike, 
which  is  threatening  to  our  welfare.  We  can,  at  the  moment, 
clearly  see  that  however  prosperous  conditions  may  appear, 
this  prosperity  might  receive  a severe  check  should  a specu- 
lative fever  begin  to  rage.  Should  a stock  market  speculation 
start  from  the  present  high  level  of  prices  in  the  face  of  the 
extraordinary  demand  for  capital  and  money  which  crops  and 
business  alike  are  making,  the  result  might  easily  be  temporary 
disaster. 

I have  been  emphasizing  some  of  the  bright  sides  of  the 
picture  but  there  are  shadows.  In  a gathering  like  this  Jere- 
miahed  songs  are  not  pleasant  but  there  are  some  that  might 


13 


be  sung  which  would  not  be  out  of  harmony  with  true  condi- 
tions. Never  was  there  a better  time  to  preach  conservatism; 
never  perhaps  was  it  easier  to  be  carried  away  by  some  of  the 
obvious  features  of  prosperity  and  to  forget  some  of  the 
dangers  which  in  the  end  will  be  quite  as  potent  in  shaping  the 
ultimate  result.  “A  tree  never  quite  grows  to  heaven; ” Al- 
though there  may  be  many  favorable  features  to  the  outlook, 
it  is  no  time  for  prudence  to  be  cast  to  the  wind ; no  time  for 
speculative  commitments  which  would  yield  disaster  if  tempor- 
ary reverses  came ; no  time  for  laxness  in  any  of  the  forms  of 
business  prudence  and  conservatism. 


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